Wednesday, July 20, 2011

Will Food Stamps Lead to Nazism in America?

The stories coming out of America are heartbreaking.  45 million Americans are on food stamps.  One can find stories about ‘tent cities’ across America.  The pictures of some American cities such as Detroit appear to be very run down and depressed.  Today’s headline video on MSN Canada reports that the US “Misery Index,” which measures unemployment and inflation, is at a 28 year high.  The talk of “recovery” must be some sort of propaganda because it certainly does not seem real.

The first appendix to Hayek’s The Road to Serfdom, which he entitled Nazi-Socialism, written in the spring of 1933, should be assigned reading for understanding today’s economic and political situation.  In this appendix, Hayek gave a laundry list of symptoms of the Nazi-variety of socialism.  Hayek mentioned the Nazi’s fierce hatred of:  “anything capitalistic—individualistic profit seeking, large scale enterprise, banks, joint-stock companies, department stores, ‘international finance and loan capital,’ the system of ‘interest slavery’ in general…” (246).  All of these symptoms can certainly be found in today’s political debates.  The hatred of the banks and international finance, especially because of the bailouts, is prevalent.  The idea of “soaking the rich” seems to be in vogue; hence, our modern version of attacking individualistic profit seeking.  The symptom of attacking department stores probably finds its modern day parallel in some people’s distaste of Wal-Mart. 

Another parallel between Nazism and our current situation, also found in Hayek’s appendix, is this:  “If rule by force by some privileged group is to be justified, its superiority has to be accepted for it cannot be proved” (247).  The term ‘rule by force’ is certainly inconsistent with the ‘Rule of Law.’  The Rule of Law restricts government’s activity to what is spelled out ahead of time in a constitution and a bill of rights or other written rules and laws.  Of course, the Rule of Law did not exist in Nazi Germany.  As Hayek asked rhetorically, “But who would suggest for that reason that the Rule of Law still prevails in Germany” (119)?  The modern day parallel is the use of presidential executive orders and the Patriot Act’s evisceration of the Bill of Rights.  Another good example would be Obama’s decision to go to war in Libya without getting Congressional approval.  The attitude is that the president can do whatever he wants without any restrictions.  This is also called arbitrary government.                   

The one part of Hayek’s appendix that jumped out at me was when he wrote:  “The collectivist and anti-individualist character of German National Socialism is not much modified by the fact that it is not a proletarian but a middle class socialism…”(247, emphasis mine).  What, on earth, is a “middle class socialism”?  I had never heard of that term before; hence, I wanted to find out what Hayek meant.  On page 144 of The Road to Serfdom, Hayek defined the term in the following quotation (all emphasis again is mine).
There is a great deal of truth in the often heard statement that fascism and National Socialism are a sort of middle-class socialism—only that in Italy and Germany the supporters of these new movements were economically hardly a middle class any longer. It was to a large extent a revolt of a new underprivileged class against the labor aristocracy which the industrial labor movement had created.
To drive the point home, Hayek wrote (emphasis mine):  “It should never be forgotten that the one decisive factor in the rise of totalitarianism on the Continent … is the existence of a large recently dispossessed middle class” (215).

Totalitarianism is caused by the existence of a large and recently dispossessed middle class.  Dispossessed means that someone has been ousted or dislodged.  In other words, the former middle class has been demoted to a lower underprivileged class status. 

A related issue was the infighting among labor.  Hayek argued on pages 144-145 that an internal war had broken out between the Nazi-supporting labor and the old socialist party-supporting labor.  Hayek wrote:
Nor can there be much doubt that in terms of money income the average member of the rank and file of the Nazi movement in its early years was poorer than the average trade-unionist or member of the older socialist party—a circumstance which only gained poignancy from the fact that the former had often seen better days and were frequently still living in surroundings which were the result of this past. (144)
Therefore, one has to wonder what will happen to America with so many people in misery and on food stamps?  What inspired me to write this blog was a comment from my good friend from Connecticut.  She mentioned how everything was going so well in her life and now it is all gone for her.  Life is much harder.  She never expected to be living like this now.  Things have moved down in life for her.  This type of sentiment is exactly what Hayek picked up on in The Road to Serfdom.  Has America currently bred a group large enough to be a modern day version of what Hayek called “a large recently dispossessed middle class”?  Moreover, will we see infighting among labor?  Will we see well-paid unions of today playing the role of what Hayek called “the older socialist parties”?  This will be the group of labor enjoying the status of  “haves.”  Will we see the food stamp receivers of today playing the role of what Hayek called the “large recently dispossessed middle class”?  This will be the group of labor suffering with the status of “have not.”    

What may spark a Nazi-style revolt is the talk of reducing the funding to the food stamp program.  One has to wonder whether such discussion is deliberately meant to instigate a revolt.  Of course, I do not know the future and can only speculate.  However, the combination of symptoms suggests to me that the future will be much more totalitarian and repressive.      


Hayek, F. A. 2007.  The road to serfdom:  Text and documents.  Vol. 2 of The collected works of F. A. Hayek.  Chicago:  University of Chicago Press.

Tuesday, July 19, 2011

Does Big Business have a Special Interest in Preserving Capitalism?

 Does Big Business have a Special Interest in Preserving Capitalism?

The word capitalism was coined by none other than Karl Marx, who hoped that it would help in his crusade to denigrate the system of private property and free enterprise and to promote socialism.   Marx insinuated that the only beneficiaries of capitalism were the capitalists. (DiLorenzo 2004, 1) 

A society in which liberal principles are put into effect is usually called a capitalist society, and the condition of that society, capitalism. (Mises 2005, xxv)


The introductory quotations highlight perennial terminology problems that arise when reading works on economics.  Specifically, the terms capitalism, socialism, and liberalism from the quotations above have inconsistent meanings both across authors and across time.   To further complicate the matter, one can easily find examples of adjective modifiers attached to these terms in order to create new terms  such as Kolko's political capitalism, finance capitalism, and laissez faire capitalism, or DiLorenzo's free-market capitalism versus crony capitalism or Sombart's monopoly capitalism. Likewise, the term socialism has various adjective modifiers attached to it that create terms such as agrarian socialism, Christian socialism, Marxian socialism, national socialism, and democratic socialism. Finally, the term liberalism could be modified with modifiers such as neo- or American or English or nineteenth century or classical.  As a specific example, Rothbard (1994, 89) speaks of corporate liberalism. Sadly, this is not an exhaustive list of possibilities.

For the purposes of this post, the terms liberalism and capitalism are used interchangeably to mean property unregulated by government. The term socialism is defined as property regulated by government. These definitions are adequate because the intention of this post is to focus on whether businesses have a vested interest in an economy that is unregulated by the government.

The Progressive Era and Regulation

The Progressive Era refers to a period of American history running from approximately 1890 to 1920 although there is some variation regarding which range of years should be used when defining this era.  One definition for the Progressive Era is "the period from approximately 1900 until the United States' intervention in the war, labeled the 'progressive' era by virtually all historians" (Kolko 1977, 2).  However, including the decades before 1900  is acceptable because these decades certainly influenced what happened at the turn of the twentieth century.  For example, the merger movement period ran from 1897 to 1901 (Kolko 1977, 24).  The early twentieth century events involving Standard Oil also have influences going back to the 1870s, for example, consider the fact that  "the period Standard exercised greatest control of the industry, [was] 1875-1895" (Kolko 1977, 39).   Rothbard (1994, 81) mentions changes in the National Banking Act in 1887, defines the merger movement period as the period from 1898 to 1902 (1994, 85), mentions earlier Morgan cartelization attempts in the 1860s and 1870s foreshadowing the later merger movement (1994, 84), and discusses the Panic of 1873 (1994, 78).  Consequently, the period from 1860 to 1890 as well as from 1890 to 1920 is germane when discussing the Progressive Era.

One could argue that, conceptually, the Progressive Era goes right back to the founding of the American republic.  Both Kolko (1977, 4) and DiLorenzo (2008, 141) see the Progressive Era as nothing but a reincarnation of the "Hamiltonian unity of politics and economics."  DiLorenzo mentions how it was "Alexander Hamilton and his followers were the first to push for special privileges from the government, as they advocated a more centralized government that would centrally plan the economy primarily for the benefit of business interests" (2004, 44).  Some other terms used to describe the Hamiltonian way of thinking include:  corporatists, mercantilists, political entrepreneurs (as opposed to market entrepreneurs), and business/government partnerships (DiLorenzo 2004, 6-7).

The Progressive Era provides a case study for testing the idea that big business and big government are rivals (DiLorenzo 2008, 174).   This idea states that businesses grows bigger and bigger until they monopolize each industry.  Then government must intervene because failure to regulate the use of property will lead to the exploitation of the masses by this handful of private monopolies.  This idea sounds exactly like what Hayek calls the Marxist doctrine of the concentration of industry (Hayek 2007, 91).

The idea is wrong.  Kolko's study of the Progressive Era comes to the conclusion that "contrary to the consensus of historians, it was not the existence of monopoly that caused the federal government to intervene in the economy, but the lack of it" (1977, 5).  Contrary to the doctrine of the concentration of industry, the Progressive Era shows that competition grows more and more intense without government regulation.  "The first decades of this century were years of intense and growing competition" (Kolko 1977, 26).  In other words, Kolko comes to the same conclusion that Hayek does, namely, that monopolies are formed only with state intervention, what is a granting of privilege.  "Anyone who has observed how aspiring monopolists regularly seek and frequently obtain the assistance of the power of the state to make their control effective can have little doubt that there is nothing inevitable about this development" (Hayek 2007, 93).

The basic plot of the Progressive Era is growing competition, which threatens the established business interests.  The established business interests then try to cartelize the free market using a variety of techniques including voluntary cartels and mergers.  These attempts fail badly for the cartelizing firms.  New competitors rise up and seriously threaten the established business interests because the new firms are usually more efficient than the older ones.  "Most of the new mergers started out with less than monopoly control, and virtually all lost their initial share of the market. [...] due to the rise of important new competitors and the significant economies of size attainable at lower production levels" (Kolko 1977, 28).  In order to save themselves, the established interests then use the federal government to regulate and enforce the cartel.  These regulations, naturally, are meant to discriminate against the competitors and their use of their property.  Rothbard provides an excellent example of how the federal government becomes a tool for cartel enforcement.   Rothbard (1994, 84-85) documents how the railroad cartelization attempts of the 1860s and 1870s failed to work without government regulation.  To make the cartel work "the Morgan-led railroads turned to the federal government to regulate railroads and thereby to enforce the cartel that they could not achieve on the free market" (Rothbard 1994, 84-85).  A similar story is told by DiLorenzo regarding the banking industry in this era.  "During the late nineteenth and early twentieth centuries the banking industry faced the same issue that many other industries did:  too much competition. [...] bankers tried to create voluntary cartels, but cartels are notoriously unstable.  So inevitably they turned to government to enforce their cartel for them" (DiLorenzo 2008, 166).


Consequently, established businesses have no special interest in the unregulated capitalist or liberal system.  They do, on the contrary, have an interest in government regulation that provides them with special privileges.  The Progressive Era example highlights government offering special privileges to certain firms in order to protect them from domestic competition.  The Rothbard example pertains to competition from newly established alternative railroads; the DiLorenzo example highlights competition from state banks against the New York banks.  Without government regulation of property, the established business interests are always being threatened by rivals.  The rivals will use their property to their own benefit and will harm the vested interests of the established businesses.  With government regulation of property, the established business interests are protected from these rivals.  The rivals now can no longer use their property as they see fit.  They may be blocked from competing against the established businesses because of  licensing regulations for example.

Perhaps, the most extreme form of regulation of private property is the declaration that the state can regulate business profits possibly by calling this a regulation on "excessive" profits.  These regulations on profit, once again, harm the new rivals and help protect the established business firms.

But today the income tax absorbs 80 or more percent of such a newcomer's initial profits.  He cannot accumulate capital; he cannot expand his business; his enterprise will never become big business.  He is no match for the old vested interests.  The old firms and corporations already own a considerable capital.  Income and corporation taxes prevent them from accumulating more capital, while they prevent the newcomer from accumulating any capital.  He is doomed to remain small business forever.  The already existing enterprises are sheltered against the dangers from ingenious newcomers.  They are not menaced by their competition. (Mises 2007, 11)

The idea that established businesses will favor government regulation over the unhampered market economy in order to protect their interests against competition is nothing new.  It dates back to at least Adam Smith and his 1776 book The Wealth of Nations (DiLorenzo 2004, 44).  It reflects a failure on the part of classical liberalism to overcome the slogans of both interventionist and socialist parties (Mises 2005, 121). We are stuck in the Montaigne fallacy world where one group's profit coming from the losses of other groups.
From a practical perspective, no political party nowadays calls for classical liberal ideas.  When do politicians today speak as such: "The liberal candidate can only say to all voters that the pursuit of such special favors is antisocial" (Mises 2005, 140)?  Liberalism means no special favors for business, for labor, for banks, or for anybody.  To bring about positive change and to end this ongoing problem, we need a return to the "successful use of competition as the principle of social organization" (Hayek 2007, 86).  In this way, the interests of business must align with the interests of the masses of consumers.  Profit can only be earned when businesses best serve the needs of the consumers.  This suggests that modern movements such as the Tea Party are mistaken when they place emphasis on revolutionary symbolism such as the Boston tea party and the Gadsden flag (i.e., the yellow flag with the rattlesnake and the motto "Don't Tread on Me).  This approach marginalizes the movement by making it look extremist.  The message of the liberal reformers should be simply, "no special favors."  This is the only way to stop groups from fighting among one another.


DiLorenzo, Thomas J.  2004.  How capitalism saved America:  The untold history of our country, from the Pilgrims to the present. New York:  Random House.

---.  2008.  Hamilton's curse:  How Jefferson's archenemy betrayed the American revolution--and what it means for America today. New York:  Random House.

Hayek, F. A. 2007.  The road to serfdom:  Texts and documents. Definitive ed. Chicago:  University of Chicago Press.

Kolko, Gabriel.  1977.  The triumph of conservatism:  A reinterpretation of American history, 1900-1916. New York:  Free Press.

Mises, Ludwig von.  2005.  Liberalism:  The classical tradition.  Ed.  Bettina Bien Greaves.  Indianapolis:  Liberty Fund.

---.  2007.  Bureaucracy. Ed.  Bettina Bien Greaves. Indianapolis:  Liberty Fund.

Rothbard, Murray N.  1994.  The case against the Fed. Auburn:  Ludwig von Mises Institute.

A Look at Public University Education

A Look at Public University Education
A genius is precisely a man who defies all schools and rules, who deviates from the traditional roads of routine and opens up new paths through land inaccessible before.  A genius is always a teacher, never a pupil; he is always self-made.  (Mises, Bureaucracy 2007, 11). 

The first and most popular complaint that I received when teaching undergraduate students was that of ‘too much reading.’  One might dismiss such complaints by attributing them to laziness.  Maybe students have developed the expectation that they can coast through university, do minimal to no academic work, while still receive high grades.  In other words, maybe they have adopted the ‘something for nothing’ mindset.  Possibly, they have become too comfortable with the convenience of PowerPoint slides that free them from having to read books.  Maybe the students have no time for readings because their schedules have been filled already with socializing, sports games, beer pong tournaments, and video game playing.   

It is easy for a teacher to blame the students.  They are young, sometimes immature, and subjected to plenty of peer pressure.  If I were a university administrator, my automatic response would be to blame the teacher.  It must be something the teacher did wrong.  Maybe the teacher has not ‘engaged’ the students enough.  Maybe the teacher has used the incorrect ‘learning style.’  Maybe Johnny is a visual learner rather than an audio learner. 

The purpose of this paper is to attempt to answer two questions that I had often posed to myself.  Why did I feel as if I were teaching junior high school students in university, and why did nobody in authority seem to care?  To try to answer these questions I did two things.  I reported on some of the complaints that I received and on some of my observations.  I then created a model as an attempt to explain my historical observations and experiences.  My thesis is that university students, generally speaking, are academically unprepared for a rigorous education because they are victims of the whole-word method of reading instruction.  The whole-word method created a crisis of vocabulary.  The vocabulary crisis made books inaccessible to students, which then necessitated a drop in content knowledge levels.  This lack of content knowledge made expecting students to think critically and independently an impossibility.  The system then created a number of ways to cover up this problem.           

I began this paper by mentioning one of my favorite complaints, namely, ‘too much reading.’  This complaint applied to not only books but also test scripts.  To expect students to come to class with the assigned readings done ahead of time was to expect a miracle.   Moreover, I noticed that I could use vocabulary as a rule-of-thumb for spotting plagiarism.  If a word looked somewhat complicated, then it probably was not the student’s word.  A simple Google search of a phrase was sufficient to demonstrate this.  I was accused of being ‘condescending’ for using ‘big’ words.  How to explain Keynesian economics without mentioning ‘desired aggregate expenditure’ or ‘the multiplier effect’ in order to use a ‘non-condescending’ vocabulary was a mystery to me.  Another popular complaint was the insolent demand ‘just tell me the answer.’  This complaint usually arose if I did not tell them directly the answer but rather posed questions to them.  Assigning written case studies to students was invariably a bad idea.  As a case in point, students were given a 40-page business plan that must have been deliberately designed to be a disaster.  Yet, the same style of responses would appear repeatedly semester after semester with hardly anybody actually writing a legitimate critique of the plan.  In addition, I was amazed that I could easily confuse students with high school level mathematics.  Another disturbing observation that I made was the tendency to water-down textbooks.  To summarize, Hamlet needs revision.  Something is rotten not only in the state of Denmark but also in the modern public university.

How could I explain this combination of symptoms and observations?  I decided to begin my model-building investigation with the issue of reading itself.  The reason was because I read a number of stories on the Internet that went something like this:  Sally was an ‘A’ student in high school, valedictorian, breezed by all of her courses, and then nearly flunked out of university because she could not do the readings.  These anecdotes got me thinking.  Maybe the problem was that most of the students in university could not read at university level; hence, the complaint of ‘too much reading’ was really a complaint of ‘I can’t read these books.’  I surmised that the reading problem then caused all the other symptoms that I observed.      

Moreover, learning to read independently was supposed to be the first goal of primary education; hence, reading seemed to be the most natural place to start.  When I was in grade one, I had a red phonics textbook and had lessons that taught sounds, for example, the ‘ch’ sound accompanied by examples such as ‘child’ or ‘church.’  However, the whole-word method taught students to guess at words not to actually read them.  This paralyzed the rest of their primary and secondary educations.  Primary and secondary schools failed to build vocabulary and content knowledge levels.  Then, when high schools sent these graduates off to university, the recent graduates were unable to engage in critical thinking.  Since trying to fix the underlying problem would be rather difficult, the universities chose the expedient solution of dumbing everything down.  In the final analysis, the bureaucratic system won at the expense of both students and taxpayers.  The danger of this expedient system for civilization is that by producing unscientific minds, civilization is now much more likely to adopt non-economic ways of thinking.  Economics is a system for the harmonious and voluntary cooperation of individuals.  Without economics, civilization retrogresses back to social disharmony and war. 

My model is as follows:       

Hypothesis 1:

Increased exposure to whole-word reading instruction (equivalently, a decreased exposure to phonics-first instruction) will cause a decrease in student vocabulary levels. 

John Taylor Gatto, citing Dr. Seuss, concisely summarized the basic differences between the phonics method and the whole-word method.   Unfortunately, my version of Gatto’s Underground History is so underground that it does not even have page numbers!  My PDF reader has it at 71/304.

That was due to the Dewey revolt in the twenties, in which they threw out phonics reading and went to a word recognition as if you’re reading a Chinese pictograph instead of blending sounds or different letters.  I think killing phonics was one of the greatest causes of illiteracy in the country.

Mises, in an essay originally published on April 3, 1962, corroborated Dr. Seuss’s claim that Dewey was responsible for the change in reading instructional methods.  Mises wrote in this 1962 essay entitled A Dangerous Recommendation for High School Economics that: 

The modern American high school, reformed according to the principles of John Dewey, has failed lamentably, as all competent experts agree, in the teaching of mathematics, physics, languages, and history.  If the plans of the authors of this report materialize, it will add the teaching of economics to its other failings, and will also add to the curriculum indoctrination in very bad economics.

Mises mentioned the resulting indoctrination produced by Dewey’s system.  Being an automaton that waits to be told what to do is not supposed to be the objective of education in a free society. 

Unfortunately, the indoctrination of students is only one problem resulting from Dewey’s system.  Another major problem is that Dewey’s system decimates student vocabulary levels.  The most important quote from Gatto’s Underground History that supports the idea that the observed collapse in vocabulary can be attributed to the use of the whole-word method is found on what my PDF reader calls 66/304.

By the end of the fourth grade, phonics-trained students are at ease with an estimated 24,000 words.  Whole-word trained students have memorized about 1,600 words and can successfully guess at some thousands more, but also unsuccessfully guess at thousands, too.  One reigning whole-word expert has called reading a “psycholinguistic guessing game” in which the reader is not extracting the writer’s meaning but constructing a meaning of his own.

A reader trained in statistics could fault Gatto for failing to report the sample sizes and the standard deviations.  In other words, Gatto should have checked to see whether the difference between these two sample means was statistically significant.  Nevertheless, assuming these numerical results are representative of what to expect in the future from each method, the practical significance is that the whole-word method will prevent a student from building a vocabulary. 

Gatto’s numbers pertain to fourth grade students.  During the span of time from fourth grade to university attendance, the whole-word trained student might be able to pick up a larger vocabulary.  Unfortunately, at the time of writing, I was unable to find a study of freshmen university students that compared current vocabulary levels across the two groups, i.e., that compared the vocabulary level of freshmen university students originally taught reading with phonics with that of freshmen originally taught with the whole-word method.  Even so, Maureen Stout, in her book The Feel-Good Curriculum pages 134-135 wrote that the reading problem is not isolated to lower-level grades but continues into higher grade levels.

Children are not learning to read unassisted but are still struggling with the basics in the fifth and sixth grades and even later.  At Fern Bacon Basic Middle School, for example, in Sacramento, California, where 80 percent of students read at fourth-grade level or below, teachers are using flashcards to teach thirteen- and fourteen-year-olds basic English.

Therefore, it seems possible that these whole-word trained students in fourth-grade have fallen behind and stay behind their phonics-trained peers.  A fourteen-year old learning basic English is a grade 9 student in trouble.  This student only has four years to now master the language and then head off to university.  The phonics-trained student mastered the basics in grade one and so has seven additional years (i.e., grades 2 through 8) to develop his or her English skills.  In other words, it appears as if university freshmen originally trained with the whole-word method will be seven years behind freshmen originally trained with the phonics method.  In other words, the average university freshman is still at a grade 6 English reading level.   Therefore, I am not surprised that I read stories of freshmen being unable to read at a university level.

Hypothesis 2:

Decreased student vocabulary will cause decreased levels of knowledge. 

Charlotte Iserbyt, in her book Deliberate Dumbing Down, pages 105-106, discussed the link between vocabulary level and level of student knowledge. 

Gaston nodded solemnly:  “Young people know fewer words than their fathers.  That makes them know less.”  He fixed me with a foreboding eye:  “Can you imagine what a drop in knowledge of 1 per cent a year for 30 years could do to our civilization?”

Iserbyt did not mention the process by which lower vocabulary caused knowledge levels to fall.  This probably was because her source was referring to correlation studies.  My hypothesis is that with low vocabulary levels, books become inaccessible to students.  The student will be sitting there with a page open and will not know most of the words because the student has not previously memorized them.  The student will be frustrated because each attempt to read a serious book fails.  The teacher then has to tell the students the course content orally probably using bullet point PowerPoint slides.  In other words, the students will have to be ‘spoon-fed’ the course content orally.  ‘Spoon-feeding’ is an inefficient way to put knowledge into a student’s mind.  Much more content could be covered if the students were to be assigned serious books to read.  Therefore, low vocabulary levels will be associated with low content knowledge levels. 

Hypothesis 3:

Decreased student knowledge will cause decreased levels of critical thinking. 

Maureen Stout, on page 28 of her book The Feel-Good Curriculum, pinpointed the link between content knowledge and ability to engage in critical thinking.  According to Stout, the failure to develop content knowledge makes critical thinking impossible.  The students will never be able to think for themselves rendering them vulnerable to demagogic manipulation.

Whether that development takes place primarily in the school or in the home, the development of logical and analytical reasoning—critical thinking—is essential.  But of course we don’t just think in a vacuum (ever try to think about nothing?); we need something to think about; some subject matter to chew over; some body of knowledge that will put our brains to work.  Critical thinking is like reading and writing:  you can talk about it all day, but in the end you learn to do it by just doing it.  So fourth, we need to learn some body of knowledge.

Hypothesis 4:

Decreased ability to think critically will cause increased acceptance of non-scientific ideas.

In the foreword to the book Global Warming in a Politically Correct Climate, Dr. Zbigniew Jaworwski noticed a trend toward irrational thinking when it comes to the issue of global warming.

Mankind is sometimes described as “anthroponemia,” or the “cancer of the biosphere.”  This is caused by a number of modern irrational myths, which seem to have replaced the ghosts, haunted houses and witches of past generations.

Jaworwski’s description sounds as if it were a dream come true for Marxists.  Mises described the basic mindset of the Marxists as follows in Theory and History: An Interpretation of Social and Economic Evolution, page 75.  Notice the similar invocation to a ghost-like or divine-like being in order to make the theory work.  The Marxist phantom goes by the name ‘material productive forces.’  

We may summarize the Marxian doctrine in this way:  In the beginning there are the “material productive forces,” i.e., the technological equipment of human productive efforts, the tools and machines.  No question concerning their origin is permitted; they are, that is all; we must assume that they are dropped from heaven. 

In The Ultimate Foundation of Economic Science: An Essay on Method, page 6, Mises explicitly stated that this appeal to a ghost, phantom, or god is not science but rather metaphysics.  Mises wrote: 

The endeavors of the metaphysical discipline commonly called philosophy of history to reveal in the flux of historical events the hidden plans of God or some mythical agency (as, for instance, in the scheme of Marx, the material productive forces) are not science. 

Hypothesis 5:

Non-scientific minds will facilitate the destruction of Western civilization.

Mises wrote in his introduction to Human Action:  A Treatise on Economics page 10 that, “It is true that economics is a theoretical science and as such abstains from any judgment of value.”  In other words, a world full of people unable to think scientifically will also be a world unable to grasp economics.

A world unable to grasp economics is a world unable to maintain civilization.  Mises continued on page 10:

This civilization was able to spring into existence because the peoples were dominated by ideas which were the application of the teachings of economics to the problems of economic policy.  It will and must perish if the nations continue to pursue the course which they entered upon under the spell of doctrines rejecting economic thinking.

For example, the Zeitgeist movement would have us return to a non-monetary society.  Without money, how do they expect exchanges to happen?  Of course, in their scheme, exchanges are superfluous because somehow they have overcome the problem scarcity.  Many socialists have made this claim before.  The most basic question that a critical mind should ask is ‘why this time?  Why should we believe you now when you have been wrong so many times before?’  Then, a critical mind might say, ‘Show me how you have overcome scarcity.’  Would not technological progress lead to people demanding more goods and different goods than they had before?  Would not the desires of people always far exceed the ability of a production process to keep up?   

As Hayek wrote in The Road to Serfdom, page 131 regarding the claim of ‘abolishing scarcity’:

In their wishful belief that there is really no longer an economic problem people have been confirmed by irresponsible talk about “potential plenty”—which, if it were a fact, would indeed mean that there is no economic problem which makes the choice inevitable.  But although this snare has served socialist propaganda under various names as long as socialism has existed, it is still as palpably untrue as it was when it was first used over a hundred years ago. 

The population of the world will collapse if the world’s economy is subjected to both scarcity and no monetary exchange.  Monetary exchange facilitates the division of labor, and the division of labor facilitates higher levels of output that can then support larger populations.  In other words, the implementation of the Zeitgeist movement’s agenda will result in a large reduction of the world’s population.  Yet, this movement is quite popular at least on Facebook. 

In addition to helping promote socialist ideology, unscientific minds help advance the destructionist policy of inflation.  In Socialism: An Economic and Sociological Analysis, page 449, Mises mentioned, back in 1922 that inflation is a tool for destroying civilization.  Mises wrote:

The destructionist policy of interventionism and Socialism has plunged the world into great misery.  Politicians are helpless in the face of the crisis they have conjured up.  They cannot recommend any way out except more inflation or, as they call it now, reflation.  Economic life is to be “cranked up again” by new bank credits (that is, by additional “circulation” credit) as the moderates demand, or by the issue of fresh government paper money, which is the more radical programme.

The solution to this destructionist problem, according to Mises, is to educate the population about the difference between free markets and interventionist policies.  In Economic Freedom in the Present-Day World, page 278, Mises wrote:

Therefore nothing is more important today that to enlighten public opinion about the basic differences between genuine liberalism, which advocates the free market economy, and the various interventionist parties which are advocating government interference with prices, wages, the rate of interest, profits and investment, confiscatory taxation, tariffs and other protectionist measures, huge government spending, and finally, inflation.

However, how can one educate the population on this difference if most of the population has had their ability to think paralyzed by state-funded education?  The odds are definitely stacked against Mises’s proposals; he was completely aware of this problem when he wrote on page 277 of the same essay:

These two doctrines are today taught at schools, expounded in books, magazines, and newspapers, professed by political parties, and practiced by governments.  There are socialist schools, books, periodicals, parties, and governments, and there are interventionist schools, books, periodicals, parties, and governments. 

Where are the state-subsidized laissez-faire capitalist free market schools?  I attended two separate universities in Ontario, and I received two separate degrees in business.  Yet, I never learned laissez-faire in either of them.  So if business schools do not teach laissez-faire then who will?  Certainly, no one is naïve enough to assume that the political science professors who obsess over Karl Marx will present a fair and balanced treatment of laissez faire.  Will the history professors who disparage men such as Thomas Jefferson because he held slaves now extol the Jeffersonian virtues of minimal government and no central bank?  Will the women’s studies professors stand in favor of the ‘bourgeois’ ideas of private property and the division of labor?  Will they denounce unions, labor laws, and affirmative action hiring as forms of discrimination against the non-union members and against the non-victim group members?              

If most people could actually think through the problems of economics, they would realize that political leaders are worse than useless.  Political leaders are destructive because they keep adopting interventionist policies.   If most people could actually think through the problems of economics, they would realize that the entire system is rigged to benefit the connected at the expense of the masses.  They would see that institutions such as the Federal Reserve were deliberately set up to substitute a technocratic approach for a sovereign citizens approach.  This ability to think independently would be revolutionary; it would threaten the whole existing social order.  This explains why the current system is hostile to critical and independent thinking.    

Summarizing Hypotheses 1 through 5:

The whole-word method of instruction destroys the vocabulary level of students in the early elementary school grades.  They will then be deficient in terms of reading and vocabulary for the rest of their lives.  They will not catch up later on in their academic studies.  Trying to save fourteen-year olds by teaching them basic English is not a feasible way of running a school system.  The collapsed vocabulary level will then force teachers to ‘spoon-feed’ content because books can no longer function as the means of transmitting information.  The ‘spoon-feeding’ of content will result in less content coverage.  The body of knowledge inside a student’s brain will be lower than what it would have been had the student been able to access a library of books.  The lower content knowledge will then force schools to abandon any attempt at developing students’ critical thinking skills.  The student, lacking a sufficient knowledge base, simply cannot be asked to think critically.  These uncritical students will be easy targets for irrational and unscientific theories and ideas; hence, they will not be able to grasp economic thinking.  This will ultimately accelerate the collapse of the Western civilization.

Hypothesis 6:

The inability to engage in critical thinking will force schools to dumb down everything.

I noticed when I was in graduate school a bias in favor of the lowest common denominator.  I remember reading a while ago an online source that called this the cotton candy versus broccoli problem.  Broccoli students want to learn; broccoli students want real substance.   Cotton candy students, on the other hand, want to substitute entertainment and fun for academics.  Cotton candy students want fluff.  I had a graduate school examination in business research methods that consisted of the following.  The teacher posted online the lecture slides, naturally in PowerPoint.  The students then memorized the content of these slides, thus making the reading of the textbook a superfluous activity.  The test consisted of filling in the blanks from the same PowerPoint slides.  In other words, students did not need to analyze critically anything.  Moreover, they did not even need to understand any of the content.  Effectively, they were asked to demonstrate their ability to memorize PowerPoint slides.  This test, although attempting to be cotton candy oriented, was sub-optimal.  The teacher made a mistake by expecting students to write out what they memorized in answer books using a pen or a pencil.  One complaint that I received was that I caused a student to have a ‘wrist injury’ for making him write out his own lecture notes.  Therefore, a better teacher would have used Scantron multiple-choice format with four, not five, possible answer choices because five choices would constitute ‘too much reading.’  A five-star teacher would have used the ‘true-false’ format because this format not only minimizes reading but also ensures a fifty percent chance of guessing correctly.  Moreover, the ‘effective’ teacher should bring pencils and erasers to class because expecting students to come prepared would be asking too much of them.   

 Hypothesis 7:

Dumbed down courses cause students to spend less time on academics and more time on non-academic pursuits.

Since students have been absolved of all their academic responsibilities, i.e., they do not have to read, to write, to attend class, or to think, what then will they be doing with all of their spare time?  They might have to grudgingly spend a few hours memorizing a bunch of PowerPoint slides before a test, but what will they be doing during all the rest of their time?  I remember receiving complaints that I made students have to study on a weekend.  Apparently, their other ‘effective’ teachers designed things so that they would not have to study for more than three hours for a final examination.  I guess the lesson learned here is:  do not interfere with fun time.  Sadly, we may have reached the point where fun time is now all the time. 

Skipping and walking out are all too common, except immediately before a test or examination.  The rate of absence can be as high as 80%, if class time is a Thursday night or if the topic is mathematics.  I doubt that students who are absent habitually are actually engaged in autodidactic learning.  

Should teachers at a university do something about this attendance problem?  Should they try to force students to spend more time on academics?  A few months ago, I posted on Facebook a story about how Buffalo, New York was planning to hire back a small army of truancy officers.  A friend of mine, who has taught high school, thought that this was a great idea because he also experienced the absentee problem.  I used to think this way.  However, I changed my mind.  Forcing students to attend lectures against their will was counterproductive.  All this produced was a chorus of complaints.  Every ten minutes the forced to attend students will interrupt with the complaint of ‘will that be on the test?’  To use a phrase from the movie A Beautiful Mind, I was surrounded by the “young, eager minds of tomorrow.”  Another popular complaint was to shout out, ‘but that’s not my major!’  Actually, both students and administrators will use this excuse.  If the teacher mentioned something involving numbers then the student can claim, ‘but I’m not a math major.’  If the teacher criticized the student’s essay then the student can claim, ‘but I’m not an English major.’  I labeled this way of thinking the ‘hermetically sealed box’ problem.  The student has boxed his or her mind into one and only one area of interest.  An extension of the ‘hermetically sealed box’ problem is to apply it to temporal issues.  For example, many students erroneously view each class as a ‘self-contained’ unit.  A student should never be expected to integrate material from previous courses.  I had students who boldly declared, ‘after the exam, I will forget it all anyway.’  Therefore, from a practical perspective, forced attendance does not work. 

The other major mistake was to subject the broccoli students to the cotton candy students.  By forcing attendance, everybody lost.  The broccoli students were held back academically because of the incessant interruptions coming from the cotton candy students.   Moreover, to make the class ‘accessible,’ the teacher must set the academic standard at the cotton candy level.  The cotton candy students were obviously not happy because they were forced to do something against their wills.  The taxpayers should be furious that they are paying for an education that is not happening.  The taxpayers should demand a refund, but realistically that will never happen under a state-funded model.

The practical teaching solution is to let the cotton candy crowd skip.  In fact, the easiest way to drive the cotton candy students out is to begin the first class with a high school mathematics lesson.  For the rest of the semester, I only had to teach the 20% of the students who were broccoli type.  This made my teaching experience much more meaningful because now I did not have to listen to all the complaints from the cotton candy crowd.  I could actually teach; I did not have to self-censor or coddle.  I did not have to worry about ‘using big words.’  I could raise my academic standards.  I could get students to ask questions, to dig deeper, and to want to learn more.  Students would come prepared.  It was great!  To deal with the cotton candy crowd, simply email them enough canned questions and answers so that they can pass the exams.  For example, if you want to engineer a class average of roughly 60% and you have a multiple-choice test worth 100 points, then send them maybe 50 of the questions and answers ahead of time.  Since the cotton candy crowd will only memorize and regurgitate what you send them, they will all score around 50%.  Your broccoli students will score on average around 80%.  The weighted average is then (80% of the students * 50 points) + (20% of the students * 80 points) = 56 points on average.        

The sad truth seems to be that cotton candy students want to be dealt with as if they were Pavlov’s dogs as opposed to human beings.  They want to be trained not educated.  They do not want to understand.  They do not want to think.  Just tell me the answer!  This is exactly what the Scanton memorize and regurgitate process encourages.  If you ring a bell (stimulus), Pavlov’s dog salivates (automatic response).  If you give your student the appropriate question stem (stimulus), they will give you exactly what they have memorized (automatic response).  This is exactly the thought process I went through when I concocted my scheme for multiple-choice tests above.  I surmised that even if my students could not read my canned questions and letter answers they could at least do some sort of ‘picture’ recognition.  They could look at the question as if it were a picture.  Then, when they saw the same ‘picture’ on the actual exam they would automatically fill in the appropriate Scantron bubble.   In other words, the examination is not about academics but really about the teacher’s ability to ‘effectively’ condition student responses.  By controlling the number of conditioned responses, the teacher can then pretty much engineer whatever grade average the teacher wants to see.  This works because the cotton candy students will answer the non-conditioned questions incorrectly.

Hypothesis 8:

The combination of dumbing everything down with most time spent on non-academics results in higher enrolment.

Dumbing down protects the ‘retention-based’ funding model.  This model says that students are ‘customers’ or sources of revenue.  Failing plenty of students means less revenue; hence, it is in the best financial interests (at least in the short-run) to keep these students around for as long as possible, assuming of course that their checks keep clearing.  In the long-run, this method is self-defeating because it will destroy the credibility of the institution’s degree.   

The problem is further exacerbated when the current students lets their friends know about how much fun they are having in their dumbed down university.  This encourages even more young people to sign-up for the university party.

Hypothesis 9:

Higher enrolment leads to increased budgets and bigger budgets lead to a bigger army of bureaucrats.

John Taylor Gatto, in his book Dumbing us Down, on page 58 pointed out that “Nearly a century ago a French sociologist wrote that every institution’s unstated first goal is to survive and grow, not to undertake the mission it has nominally staked out for itself” (emphasis in the original).  In other words, one should expect that education is not the goal of the university.  The real goal is institutional survival. 

Take for example, this bizarre obsession with grades.  Bureaucrats will obsess about grades.   They monitor grades under the assumption that they actually measure something meaningful.  It would be unfair to give one section more A’s than another section!  The perverse notion seems to be that a teacher is a distributor of a scarce resource called ‘high grades.’  If one class receives more of these scarce resources than another does then an injustice of unequal distribution of grades has occurred.  This is a serious issue worthy of bureaucratic response.  This happened to me; I was accused of being ‘unfair’ to one section for ‘giving’ them fewer A’s than I ‘gave’ to another section.  (As an aside, what ever happened to ‘earning’ one’s grade?)

This equal grade distribution obsession exposes the complete bankruptcy of the ‘student as customer’ phrase. Part of the reason for why one often hears the use of the term ‘customer’ in education is to imply that profit-seeking individuals have hijacked the university.  In other words, capitalism with its profit-orientation has destroyed education.  Capitalism has robbed her of her noble pursuit of truth by sullying her with base monetary considerations.  The specter of greed now haunts the hallowed hallways of higher learning.  This portrayal is made by Craig Brandon.  Brandon’s book is quite accurate in its portrayal of the modern university.  However, his indictment of capitalism is wrong.  In his book, The Five-Year Party, on page 9 he wrote,  “The takeover of American colleges by these new CEO-wannabe administrators with their eyes firmly focused on the bottom line completely changed the power structure of higher education.”  On page 8 he wrote of the greed-obsessed university administrators, “These new administrators had more in common with Gordon Gekko than they did with Aristotle.”  However, if the modern university were a capitalist institution, i.e., a laissez-faire institution run by CEO wannabes, then why is there this obviously communistic obsession with equal distribution of grades?  Surely, no one will argue that capitalism or laissez-faire is a system designed to ensure equal distribution of scarce resources.  Yet, this supposedly Gordon Gekko run institution is also worried about the equal distribution of the scarce resource called ‘high grades.’ 

The problem here is that students are not customers and university administrators are not CEOs.  These terms make a false comparison.  At best, students are ‘second-class’ customers because they only buy part of their education.  Milton and Rose Friedman, in Free to Choose, page 175 wrote:

At government institutions at which tuition fees are low, students are second-class customers.  They are objects of charity partly supported at the expense of the taxpayer.

Of course, students who receive state subsidies are not paying the full-price of their tuition.  It is misleading to call them charity cases.  Charity implies a choice.  I can give money or not to a charity recipient.  Paying taxes is not charity; it is coerced behavior.  These ‘second-class customers’ are objects not of charity but of some state imposing its value system as the only acceptable value system.  This negates the value systems of the individual taxpayers.  The taxpayer as consumer is not permitted to consume what he or she values.         

A better characterization might begin by claiming that administrators are ‘political entrepreneurs,’ to use Thomas DiLorenzo’s phrase (2004, 111), and students are simply the prize that all ‘political entrepreneurs’ seek, namely, subsidized government handouts.  Public funding of state-universities has nothing to do with capitalism (laissez-faire) but rather has everything to do with mercantilism.  Using DiLorenzo’s approach, the confusion is caused by failing to distinguish between ‘political’ and ‘market’ entrepreneurs.  ‘Political’ entrepreneurs receive state subsidies and function in an environment rigged by government in their favor.   A ‘market’ entrepreneur functions in an environment without government favoritism.   A ‘market’ entrepreneur has to convince the customer to engage in a voluntary exchange.  A ‘political entrepreneur’ does not convince the taxpayer of anything because the taxpayer is forced to pay.

In addition, one can easily see a historical pattern of misrepresenting government interventionism as if it were free market economics.  Mises wrote on pages 277-278 of Economic Freedom in the Present-Day World:

How could they realize this, when there are so many groups eager to represent a policy of interventionism as a policy for the preservation of economic freedom and the market economy?

This is what the public universities are doing.  They represent a policy of interventionism as a policy for the preservation of free markets.  They speak of ‘customer satisfaction’ but are really beneficiaries of government protectionism (i.e., a type of intervention).  There certainly is not free entry into the university industry.  If there were, then many of these public universities would be in trouble.  Far too often courses consist of presenting to students pre-packaged PowerPoint slides, pre-packaged test banks, and pre-packaged videos.  In other words, public universities are selling a ‘canned’ solution or a homogenous product.  If the market were free in the sense of free entry, then entrepreneurs would rush in to undercut the public universities.  Instead, of having armies of bureaucrats, physical lecture halls, security forces, cleaning staff, parking lots etc., an entrepreneur could easily take the pre-packaged ‘canned’ solution, deliver it over the Internet, and charge a much lower price.  The entrepreneur could easily provide price competition while rending the existing university business model obsolete.        

Another reason demonstrating why CEOs are not running public universities is that they oppose innovation.  I remember being laughed at by administrators for trying out different innovations.  They laughed at my YouTube 10 minute clips idea.  I thought it was a brilliant idea because I had found a solution for getting around the reading problem.  Using my system, students could watch clips whenever watching was convenient for them to do so.  Effectively, I had created an audio book.  Of course, by giving my video clips away free, I created ‘unfair’ competition for the bookstore.  What was I thinking!  The fact of the matter is that this hostility toward innovation is not characteristic of a CEO functioning as a ‘market’ entrepreneur.  It is however, characteristic of bureaucratic management.  As Mises wrote in Bureaucracy, page 84:

No bureaucratic system can achieve anything else.  But it is precisely this adamant conservatism that makes bureaucratic methods utterly inadequate for the conduct of social and economic affairs.  Bureaucratization is necessarily rigid because it involves the observation of established rules and practices.

A CEO functioning as a ‘market’ entrepreneur has to innovate.  Not innovating means death to an organization.  Therefore, our university administrators are not CEOs because they are living in some sort of fairytale world that allows them to survive without innovating.  Gabriel Kolko, in his book The Triumph of Conservatism:  A Reinterpretation of American History, 1900-1916, provided a case study of what happened in a market to a firm that failed to innovate.

Kolko on page 42 succinctly summarized the factors that caused Standard Oil to lose market share. 

In this area the independent oil companies led the field, pioneering in gas stations in the same way that they had surpassed Standard in developing improved tank cars and trucks as well as most of the major innovations in petroleum chemistry.  In a spiraling market for oil such as existed from the turn of the century on, Standard, conservative and technologically uncreative, was no match for the aggressive new competitors.  The dissolution decree of 1911 tended to knock Standard out of its lethargy […]

The internal ideological conformity of the university guarantees that innovation will never happen.  Grass-roots initiatives on the part of teachers are unlikely, maybe even impossible.  To innovate, one has to challenge the existing order.  In fact, as Mises pointed out in Liberalism: The Classical Tradition, page 32:

All mankind’s progress has been achieved as a result of the initiative of a small minority that began to deviate from the ideas and customs of the majority until their example finally moved the others to accept the innovation themselves. 

The university has a culture hostile to anyone deviating from the approved customs and teachings.  I remember that I was told explicitly not to innovate.  After all, innovation implies that differences will appear across teaching sections in direct violation of the ‘equality’ and ‘fairness’ provisions of our pseudo-CEOs.  Much of this problem stems from the one-sidedness of the hiring process.  By hiring people that all share the same perspective, the university guarantees that nobody will challenge the status quo.  Mises mentioned this problem in an essay entitled Economic Teaching at the Universities, reprinted in Planning for Freedom, page 162:

The mischief is rather to be seen in the fact that the statements of these teachers are not challenged by any criticism in the academic sphere.  The pseudo-liberals monopolize the teaching jobs at many universities.  Only men who agree with them are appointed as teachers and instructors of the social sciences, and only textbooks supporting their ideas are used.      

Mises was not alone in his observation that hiring processes often discriminate against the innovators.  William Greider, in his book Secrets of the Temple, page 285 observed that the Federal Reserve System, at its inception, deliberately discriminated against original thinkers.

The System’s many research departments did not, as a rule, hire eccentric thinkers who produced grand new theories of economics that might disrupt conventional thinking.

Therefore, it is erroneous to suggest that university administrators have anything in common with a business CEO.  They are bureaucratic ‘political’ entrepreneurs not ‘market’ entrepreneurs.  They function in a conservative environment not in a dynamic one.  As Mises argued in Liberalism:  The Classical Tradition, page 74, “No private enterprise, whatever its size, can ever become bureaucratic as long as it is entirely and solely operated on a profit basis.”

Hypothesis 10:

To maintain the army of bureaucrats, new policies must be invented to protect the system from outside scrutiny.  The bureaucrats will dream up additional ways to dumb the system down while pretending that their interventions are beneficial.  Hence, retention-based funding will lead to the outcomes predicted by the theory of bureaucratic displacement. 

Milton and Rose Friedman, in their book entitled Free to Choose: A Personal Statement, wrote on page 155 (emphasis in original):

We referred to the Theory of Bureaucratic Displacement that Dr. Max Gammon had developed after studying the British National Health Service:  in his words, in “a bureaucratic system…increase in expenditure will be matched by fall in production… Such systems will act rather like ‘black holes’ in the economic universe, simultaneously sucking in resources, and shrinking in terms of ‘emitted’ production.”

One effective tool in this regard is the utilization of student evaluation scores to determine hiring and firing decisions of faculty.  Not only does this ensure that academic standards have to collapse but this also creates the illusion that the army of bureaucrats is hard at work protecting students from ‘ineffective’ faculty.  Moreover, this becomes the tool for measuring student satisfaction, which then is advertised to attract more students.  I remember when I had some students shout out in class something along the lines of:  ‘Well, Professor (name withheld) let’s us out early, sometimes one-and-a-half hours early all the time and we get great grades.’  This is exactly what the student evaluation process produces, professors who have to encourage skipping and high grades for no academic effort.  Student evaluations guarantee the slackers paradise.  Seventeen-year olds now run universities.  What more proof does one need of the insanity of this entire system?  This is why the army of bureaucrats monitors student evaluation scores, and it could care less about plagiarism, skipping, cheating, and all the other academic deficiency problems. 


This paper highlights the fact that too many students in university today display all the signs of being grossly unprepared for the rigors of a university education.  Not all students are deficient; one can find roughly 20% of a class that wants to learn and deserves admission to a university.  My paper focused on the remaining 80%.  Maybe future research could show that the former group was mainly trained in phonics while the latter group was trained mainly in the whole-word method.  My paper tried to show that these university students were academically damaged in their lowest-grade levels.  They were not taught how to read properly and this deficiency became a life-long handicap.  The whole-word method created a vocabulary deficiency handicap, thus making it impossible for students to read serious academic books.  This forced the teachers to have to rely upon a ‘spoon-feeder’ approach that necessitated less content knowledge coverage.  The lack of content knowledge made it impossible for students to think critically.  To cover-up all the failure, everything was dumbed down and the theory of bureaucratic displacement took over.  More and more money was thrown at education not to solve the underlying problem but rather to hide the problem from everyone. 


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